Barclays and New York Attorney General in tit for tat

First Published 25th July 2014

Barclays says New York Attorney General complaint not justified.

New York - Barclays has issued a
response to the complaint against it by the New York Attorney
General.

A spokesperson said: "Barclays works closely with its regulators
in all jurisdictions and will continue to cooperate with the New
York Attorney General. However, we do not believe that this suit
is justified, and we have a duty to our shareholders, clients and
staff to defend our position." Please see attached Barclays'
memorandum of law in support of its motion to
dismiss the complaint .

The statement regarding allegations against Barclays was issued
by Damien LaVera, Communications Director for Attorney General
Eric T. Schneiderman:

"The complaint filed last month by Attorney General Schneiderman
clearly details the allegations that Barclays engaged in a
persistent pattern of fraud and deceit, lying to its investors in
order to grow its own dark pool. The Attorney General is
committed to ensuring there is one set of rules for everyone in
the markets, and will crack down on abuses wherever he sees them.
We are confident that a judge will reject this motion and allow
us to prove these disturbing allegations in Court."

Attorney General Schneiderman's complaint, filed last month,
alleges that Barclays falsified marketing material purporting to
show the extent and type of high frequency trading in its dark
pool. For example, Barclays removed from a marketing document
intended for institutional investors references to the dark
pool's then-largest participant - a high frequency trading firm
Barclays knew engaged in predatory behavior in the dark pool. In
response, one employee stated: "I had always liked the idea that
we were being transparent, but happy to take liberties if we can
all agree."

Barclays heavily promoted a service called Liquidity Profiling,
which the bank claimed was a "surveillance" system that tracked
every trade in Barclays' dark pool in order to identify predatory
traders, rate them based on objective characteristics of their
trading behavior, and hold them accountable for engaging in
predatory practices.

Contrary to those promises, the complaint alleges that:

Barclays has never prohibited any trader from participating
in its dark pool, regardless of how predatory its activity was
determined to be;

Barclays did not regularly update the ratings of
high-frequency trading firms monitored by Liquidity Profiling;

Barclays "overrode" certain Liquidity Profiling ratings -
including for some of its own internal trading desks that engaged
in high-frequency trading - by assigning safe ratings to traders
that were determined to be toxic.

The complaint further alleges that, contrary to Barclays'
representations that it protects clients from aggressive or
predatory high-frequency trading in its dark pool, Barclays in
fact operates its dark pool to favor high-frequency traders and
has actively sought to attract them by giving them systemic
advantages over others trading in the pool. As alleged in the
complaint, this included:

Falsely underrepresenting the concentration of aggressive
high-frequency trading in its dark pool;

Misrepresenting its Liquidity Profiling service - which
Barclays claimed protected investors from predatory behavior - by
failing to provide many of the benefits marketed with the
service; and

Claiming that Barclays does not favor its own dark pool when
routing client orders to trading venues, while in fact doing just
that. As alleged in our Complaint, Barclays falsified an analysis
of how it routed a major client's orders.